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Eldorado Gold Corp. (NYSE:EGO)

Q2 2008 Earnings Call

August 1, 2008 11:30 am ET

Executives

Nancy Woo - Manager of IR

Paul Wright - President and CEO

Norm Pitcher - COO

Earl Price - CFO

Analysts

Terence Ortslan - TSO & Associates

Anita Soni - Credit Suisse

Doug Groh - Tocqueville

Haytham Hodaly - Salman Partners

Kerry Smith - Haywood Securities

Steven Butler - Canaccord Adams

Steven Manning - Private Investor

Operator

Good morning, ladies and gentlemen, and welcome to Eldorado Second Quarter 2008 Financial and Operating Results Conference Call. This call is being recorded on August 1, 2008 and is also available on the Eldorado Gold website, at www.eldoradogold.com.

I would now like to turn the meeting over to Ms. Nancy Woo. Please go ahead, Ms. Woo.

Nancy E. Woo

Thank you, operator.

This presentation includes statements that may constitute forward-looking statements or information. Any forward-looking statements made and information provided reflect our current plans, estimates and views. Forward-looking statements are information which include all statements that are not historical facts, are based on certain material factors and assumptions, and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in or suggested by the forward-looking statements or information. Consequently, undue reliance should not be placed on these forward-looking statements and information. The information contained in our Annual Information Form and in our annual quarterly management discussions and analysis available on our website and on SEDAR identify factors and assumptions upon which the forward-looking statements or information are based on and the risks, uncertainties and other factors that could cause actual results to differ. All forward-looking statements and information made or provided during this presentation are expressed qualified in their entirety by this cautionary statement.

I will now turn the call over to Paul Wright, President and CEO of Eldorado Gold.

Paul Wright

Thank you, Nancy. Good morning, ladies and gentlemen, and welcome to our second quarter financial and operating results conference call. Joining me this morning in Vancouver are; Earl Price, Chief Financial Officer; Norm Pitcher, Chief Operating Officer; and Nancy Woo, Vice President of Investor Relations. We will follow the usual format with Norm and Earl providing an operating and financial commentary on the previous quarter and an outlook for the balance of the year, and then we'll open it up for questions.

We are very pleased with our second quarter results and proud of our operating teams' ability to continue to deliver in accordance with our stated plan for 2008. With 87,000 ounces produced at an average cash cost of $229 an ounce, we remain one of the lowest reporting pure gold producers, if not the lowest reporting pure gold producer. With production at 154,000 ounces at midyear, we remain on track to deliver 300,000 ounces from our two mines in 2008.

Our historical guidance for the year has been that this production would be accomplished with cash costs of $245 to $250 per ounce. Despite midyear cost of $222 an ounce, the detailed review of plan for the balance of the year suggests that yearend costs will climb to the 255 to $260 an ounce range for the 300,000 ounces described.

We are pleased with our progress on the two construction projects in Brazil and Turkey. At the Vila Nova Iron Ore project in Brazil, we remain on track to deliver our first iron ore in Q1 2009. In Turkey, at Efemçukuru work commenced in the last quarter and we are pleased with our progress.

As a result of a somewhat later stop than was originally planned in Efemçukuru, we now anticipate the initial production to commence in Q1 2010. We are presently updating the detail of our capital and operating estimates for Efemçukuru and the project schedule and we'll share that with you in September.

Exploration activities for the year are underway, and initial indications suggest that we will be improving both our resource and reserve base at our operations and projects by yearend.

In the quarter, we completed two transactions with the acquisitions of Frontier Pacific and the earn-in agreement at Brazauro Resources. We are excited with both transactions as we believed that combined they offer the opportunity to add approximately 250,000 ounces of annual production within the next five years to the corporation. Both the Perama and Tocantinzinho projects provided good match to the corporation's core competencies.

Few days ago, we announced the planned disposition of the São Bento Mine infrastructure for $70 million. We view this as a fair and appropriate end to our longstanding and successful association with the São Bento Mine. We are both pleased that the excellent infrastructure at São Bento will continue to be utilized by AngloGold and look forward to focusing our talented Brazilian team on executing our development plans in Brazil.

So, with those comments I'll hand the floor over to Norm.

Norm Pitcher

Thanks, Paul. Good morning, everyone. Obviously, a busy quarter and a very successful quarter, both operationally and with the addition of the two new projects which give us a growth platform going forward.

Let's start with operations. São Bento, as we mentioned a 20 staff there that are going to be transferred into the new company. It is 10 from the São Bento Mine itself and 10 on the exploration side. We'll keep all of those people. We're going to relocate the office from São Bento into a new office in Belo Horizonte where we will run the Vila Nova Iron Ore and the Tocantinzinho project and general exploration in Brazil. We're also working on sort of boxing up the equipment we're going to take over to Efemçukuru which are as a combination of scoops and jumbos and perhaps a few diamond drills as well.

Kisladag had a great quarter, of course. We are held by the grade there and the strip ratio was well -- was down a little bit. The model continues to predict extremely well. We're mining now on the upper benches at Kisladag with our own equipment, which is the Hitachi shovels and 785 trucks. The wheel dozer is running and our production drills as well.

We expect to complete the transition to own or operate it early in Q4. And so far, we're happy with the performance of the fleet and the employees utilizing that fleet. The forecast for the rest of the year has gone up slightly. The increased cost in the second half removed a little bit more waste than in the first half, and of course, with fuel prices as well. So we're up in the 250 range for the year at Kisladag.

At Tanjianshan in China, we have completed the transition from the QLT pit to the JLG, Jinlonggou pit. So far the mining there looks pretty good. We're mining up and our benches and pre-stripping the waste. And the model appears to be slightly under predicting there, both in terms of tons and the amount of oxide -- we're getting a little more oxide in transition than we predicted in there. The mill is generally running off QLT stockpile and JLG oxide right now. The grades are still good coming out of QLT stockpile, and we do have a little bit of excess capacity in the mill. So we feel pretty comfortable with our guidance there. And the roster is on schedule for a -- for the start-up in Q4.

On the development side at Efemçukuru, we have essentially finished the clearing. The road contractor is mobilizing this week and will start on actual construction of the access road next week. And as Paul mentioned, we will update the CapEx and operating costs in September, which will be -- the cost that we're using right now, of course, are based on feasibility study, and we'll update it based on detailed engineering.

At Vila Nova, the mining equipment will be started to deliver this month in August. That will be the backhoe and the first set of trucks. The arrival of the plant equipment is on schedule, and we are expecting the mobile conveyors and ship loading equipment which will be sort of the last big delivery items in November of this year.

Of course, we've got two new development projects which are Tocantinzinho. We've just sort of taken over management of the drill program there. Over the next several weeks we'll be reviewing that program and making sure that it meets our targets. We've got ballpark at 1 million ounces and indicated another million in inferred. We need to, obviously, bring that inferred up into mentioned indicated. We'll also be looking at the down [depth] extension of the ore body, which is still open down depth, metallurgical sampling, and then looking at the permitting track for development of the project.

At Perama Hill, of course, it is early days there. I mean, we're just really starting to review the status of the project permitting. Perama is a nice little deposit and its pretty well drilled. We don't see a lot of work on the technical side there. It's really more on the permitting and political side.

On exploration, where we're quite active this year in Turkey, Brazil and China, in Turkey we are taking a close look at the Sayacik deposit, which is a volcanic center very close to Kisladag. At Efemçukuru, as we mentioned, there are two new anomalies that have been outlined based on soil sampling. We're also looking at a small drill program this year in the North Ore Shoot, which has seen very limited drilling in the past.

Kisladag, we are about 50% through the drill program there. This is a combination of geotech holes and resource definition and expansion. And so far, we're quite pleased with what we've seen on the drilling there. And we continue on a regional basis in Turkey with target generation.

Exploration in Brazil has been mostly up-to-date, really supportive of the Vila Nova Iron Ore. We did a fairly large metallurgical drilling program there that kept the guys busy. And now we are, of course, taking over the Tocantinzinho project.

In China, most of the exploration activities have been centered around the Tanjianshan mine. We've got sort of three main targets that we're looking at there this year. One is called XLG, which is just to the South of the JLG pit that we're mining right now. And then, we've got two targets up at the QLT pit area, which is an extension of the QLT deposit along strike to the South and the other is the QLT deep extension.

When we -- the QLT finished mining really based on strip ratio, not that the ore body was finished. The floor of the pit had some fairly good high grade in it, and we're now drilling that and looking at the possibility of going underground on that for better definition. The idea there is that you could have a small underground operation that would provide some supplemental feed of non-refractory material and pretty good grades to the Tanjianshan mill.

So that's where we're at with operations, development and exploration. And I'll turn it over to Earl Price.

Earl Price

Thank you very much, Norm. Good morning. I will give a brief overview of the key accounts that have changed on each of our financial statements, and then open the line for questions.

On our balance sheet, cash. The company currently has, at the end of the quarter, 96.3 million in cash compared to 79.9 million in the first quarter of 2008 and 46 million at the end of 2007. We are now generating free cash flow from our mining operations and we continue to foresee that we will be building our cash balances.

The company remains in a very strong cash position. Restricted cash of 60 million at Q2 2008 has been reduced from Q1 2008 as we paid 10 million in debt during Q2, releasing 10 million of our restricted cash. It is our plan to pay the outstanding debt to $55 million by the end of the year, leaving us with a debt position of 5 million and the offset restricted cash of only 5 million.

Marketable securities you will note for the first time on our balance sheet of 5.6 million is composed mostly of the holdings at quarter end of our Frontier Pacific shares. Other holdings such as Luna Gold from our sale of the Arizona project to Luna Gold constitutes other shares holdings.

Liabilities. Our accounts payable of 54.4 million are up from Q1 of 48.9 million, mostly related to the additional VAT accrual in Turkey. With the reopening of the Kisladag Mine at the end of the first quarter, the bad payable has increased. Our debt of 60 million I have already referred to as part of our debt repayment schedule that will occur during the remainder of this year.

The statements of operations and deficit. Our revenues of 80 million compared to 74.8 million in Q1 2007. Our revenues have increased substantially based upon the increase in gold prices. While we sold fewer ounces compared to in 2007, the price of gold offset the lower volume. We sold in the second quarter of 2008 at $903 per ounce compared to $664 per ounce in 2007.

Cost of sales at 22.9 million compared to 31.6 million in Q2 of 2007. This is a result of our lower volume of ounces sold in 2008 Q2. Our general administration costs were higher due to development costs, travel and staffing. Guidance for the remainder of the year would be 2.2 million per month for the remainder of the year.

Taxes. There is a total taxes of 13.2 million in Q2 2008 with current taxes composed of 8.4 million and future taxes of 4.8 million. This, of course, our current taxes relates to the profitability of our producing mines in China. The future taxes are mostly related to foreign exchange gain taxes on our Brazilian loan in São Bento. The tax rates in the operating countries are, Turkey 20%, China 15%, Brazil 34%.

Non-controlling interest. For the first time on our statement of operation and deficit, our non-controlling interest appears at 5 million. This represents the 10% of the Chinese GAAP net income for our partners' interest in the TJS. For those that have interest the calculation is, Chinese income minus Chinese cost times 0.85% times 10%.

In calculating the Q2 number you should use the year-to-date. We have completed our tax audit in China in April of this year which resulted in some changes in the Chinese tax calculation which always occurs when you may be taking certain positions in your tax calculation that will later be denied by the government. One also must remember that included in the depreciation production costs number is also included our amortization of the acquisition cost of the Afcan asset, and this is excluded for Chinese tax calculation.

Moving on to cash flow, cash flow from operation is 39.3 million or $0.11 per share compared to Q2 2007 of $0.12 per share. Our capital spending of 19.5 million in Efemçukuru of 7.5 million continues on our expenditure plan to complete our capital program for the year. You will note in the other final statement that we have other income and that other income is directly related to our share appreciations of the holdings that we had based upon our June 30 2008.

That's all I have, folks. Thank you very much.

Paul Wright

Thanks, Earl. Thanks, Norm. And operator, we'll open up for questions, please.

Question-and-Answer Session

Operator

[Operator Instructions]. The first question will be from Terence Ortslan from TSO & Associates. Please go ahead. Your line is now open.

Terence Ortslan - TSO & Associates

Thanks. Good morning. Just a question on the Vila Nova Iron Ore, when do you start doing the marketing work on that studies and will the -- if any iron ore is going to be sold internally, is there different prices within Brazil then?

Unidentified Speaker

 

Well, we've actually, Terrence -- we're just finalizing the definitive agreement with BHP on the off-take agreement, and I think we've previously made disclosure on the terms.

Terence Ortslan - TSO & Associates

Okay. And so you're going to be paying marketing fee to BHP, is that what it is, they'll [pick a marketer] for iron ore.

Unidentified Speaker

 

Right. It's just simply -- they're taking 100% of the product.

Terence Ortslan - TSO & Associates

Okay.

Unidentified Speaker

 

And the rates are basically set by the [Valley] on annual basis.

Terence Ortslan - TSO & Associates

Okay. How close is [Valley] rates?

Unidentified Speaker

 

I think simply put, Terrence, we're selling at the prescribed rate, the CDR rate and we would expect that BHP's margin will be on the difference between that and the spot.

Terence Ortslan - TSO & Associates

Okay, okay.

Unidentified Speaker

 

Nature of the contract is such that we've eliminated freight risk.

Terence Ortslan - TSO & Associates

Got you. On the Efemçukuru, the large soil sampling program being done, the drill program would be able to be underway this year do you think or is it going to be only 2009 by the time it is ready for the target?

Unidentified Speaker

 

I think on those anomalies we're probably looking at next year for drilling. The current plan on the drill program is simply the North Ore Shoot and probably not these anomalies. You can appreciate we're pretty busy there right now with…

Terence Ortslan - TSO & Associates

Sure.

Unidentified Speaker

 

…production activities. But I'm not saying these are low priority, but we just got a lot on our plate right now. We'd always sort of planned to drill the North Ore Shoot because that's something that could come in to -- could go into production plan fairly quickly. But yeah, the anomalies I think will be next year.

Terence Ortslan - TSO & Associates

Okay. So altogether with the new programs and all of the program in Turkey you could use your exploration dollars will be how much about?

Unidentified Speaker

 

Around 14 million total.

Terence Ortslan - TSO & Associates

I want to look out of curiosity, what's the total exploration dollars that you spend in Turkey, everybody -- any knows? I know the numbers are like between 50 and 100…

Unidentified Speaker

 

I'd be surprised if it's that high, Terrence. And I'll just like to make one additional comment. With, obviously, the acquisition of -- well, obviously to a lesser extent the Frontier Acquisition, but certainly taking on Tocantinzinho the program for that is still being refined and it will inevitably lead to an increase in exploration expenditure for this year.

Terence Ortslan - TSO & Associates

Okay. Thanks a lot.

Unidentified Speaker

 

You're welcome.

Operator

Thank you. The next question will be from Anita Soni from Credit Suisse. Please go ahead. Your line is now open.

Anita Soni - Credit Suisse

Hi. Good morning, Paul. Just a question -- few questions actually with regards to the grades. I may have missed it. I had to jump on the call a little bit late, but Kisladag and Tanjianshan in January we're going to see this type of higher grades in Q3 and Q4.

Paul Wright

Yeah. The grade at Kisladag is going to come off a little bit, and a little bit is kind of 0.1, 0.15 grams per ton. Tanjianshan I think will probably stay about the same, and what we have done there is because the roster is looking -- is scheduled to start up November, December, we've taken a pretty conservative approach on mill throughput in those two. That's why you could sort of look at where we are now and look at where we could be at the end of the year, you might say that we're being too conservative, but we're just -- we're being a careful November, December on the mill throughput. The grades are coming out of the stockpiles. We're kind of -- we're pretty comfortable with what we've got in there.

Anita Soni - Credit Suisse

Okay. So in terms of the -- you are saying that the drop in throughput should we be forecasting what 20, 30% drop?

Unidentified Speaker

 

No. We're still on target at Tanjianshan. We're saying about 110,000 ounces.

Anita Soni - Credit Suisse

I know. Just from the modeling point of view, just for figuring out what throughput we should use for the next couple of quarters.

Unidentified Speaker

 

Well, I mean I would just sort of take the -- Anita, we're sitting in the first six months with 72,000 ounces, we're saying we're going to product a 110. So that's 40,000 ounces. And we are pointing or Norm is pointing towards the final quarter where the greatest impact -- assumed impact because of the commissioning of the roster. I would say if you -- to guide you gently, if you want to assume -- third quarter is similar in term of the throughput to-date, but the fourth quarter will be the most affected.

Unidentified Speaker

 

Yeah.

Anita Soni - Credit Suisse

Okay. And just in terms of your -- sorry, the calculation that you were talking about for -- at Tanjianshan, could you go over that again in terms of the minority interest.

Unidentified Speaker

 

Interest?

Anita Soni - Credit Suisse

Yes.

Unidentified Speaker

 

Yes, it's going to be your revenues, or in the case you take your forecasted production times your gold price for China would be your revenues minus your total production cost in above, we give you guidance on what that number is, times 85% because the tax rate we now have officially in China is 15%. And then, of course, 10% of that -- the remaining of that net income number would be from non-controlling interest. And I just want to give guidance that when you use this total production cost number, the depreciation number includes our amortization of our acquisition cost (inaudible). So that number will give you a lower number than what the actual non-controlling interest would be.

Anita Soni - Credit Suisse

Okay. So can you remind us with the Afcan transaction cost was?

Unidentified Speaker

 

Let me -- honestly, I don't remember exactly what that was, but 82 million.

Anita Soni - Credit Suisse

82 million, okay. Thank you very much.

Operator

Thank you. The next question will be from Doug Groh from Tocqueville. Please go ahead. Your line is now open.

Doug Groh - Tocqueville

Thank you, sir. Good morning, everyone. I had a question on your São Bento sale and it's just a series of questions I wonder if you could discuss it. As I understand that you're selling a subsidiary. Was that a non-operating entity? Is it -- was that impaired? Did you have an impairment there? And then how is that treated? Basically going forward, do you recognize the sale of that all in the third quarter of this year, this calendar year? And I guess you're getting shares, I guess those are freely traded shares. I don't know, do you recognize the gain or the sale of that asset as you dispense those shares?

Unidentified Speaker

 

Well…

Doug Groh - Tocqueville

How is that all treated.

Unidentified Speaker

 

I think it's -- we'll have to wait until the deal closes upon when we'll receive the shares. I think it's currently our position. We will probably trade out those shares.

Doug Groh - Tocqueville

Okay

Unidentified Speaker

 

As soon as possible. But we'll wait until we see exactly what we have at that time. And then from an accounting standpoint, yes, that will be just treated as a sale. And you will see that as a separate line item in our financial statements.

Doug Groh - Tocqueville

Okay. And so that would be a non-operating item obviously, and so that's the line?

Unidentified Speaker

 

That's correct.

Doug Groh - Tocqueville

Or do you -- you don't have…

Unidentified Speaker

 

Yeah. It will not appear in other income.

Doug Groh - Tocqueville

It will not appear as other income?

Unidentified Speaker

 

No, no. We'll have it as a separate line item.

Doug Groh - Tocqueville

Okay. And was that an impaired asset, did you consider that an impaired asset?

Unidentified Speaker

 

Well, no. We had not because we had written down that asset at the time that the mine was closed down to what we thought was going to be the value, and sitting on our books today, it has a value of 7.5 million, which would be what would be the value of the assets if we sold, the remaining equipment and our asset retirement obligation.

Doug Groh - Tocqueville

So, basically, you're realizing a $63 million gain?

Unidentified Speaker

 

Yes, I think you can probably…

Doug Groh - Tocqueville

Roughly speaking.

Unidentified Speaker

 

That's the arithmetic, Doug.

Unidentified Speaker

 

That's kind of the arithmetic.

Doug Groh - Tocqueville

Right and is that a tax consequence then, that gain.

Unidentified Speaker

 

We are working very, very strongly to make sure that the tax impact on that will be negated as much as possible.

Doug Groh - Tocqueville

All right. And I'm curious how did you come to that evaluation with AngloGold?

Unidentified Speaker

 

Mutual discussion and negotiation as you normally do on these things, Doug. Look, I mean, I think, what we have here is an opportunity for AngloGold that they recognized and we arrived at a negotiation and appropriate price.

Doug Groh - Tocqueville

And can you give us a little color, I mean, clearly you saw it worth much less than they did, and it hasn't been really operating, what, for a year plus now. What's their intention?

Unidentified Speaker

 

Well, they have a project that's immediately adjacent. I mean I think you -- what you should do, Doug, is really refer to the AngloGold disclosure on the transaction. They have made their own disclosure where I think they -- its fairly lengthy disclosure where they describe how they see utilizing the infrastructure. And that, I think -- that does explains why the price is what it is. I mean they have a project immediately adjacent that requires refractory ore processing.

Doug Groh - Tocqueville

Right. And so, just again doing some simple math if you were to sell the shares into the market and you have -- what was it -- $92 million or so in cash, in securities or so, you have about, what, 150 -- let's say, roughly $150 million. And I'm sorry I came in late to the call, curious about your CapEx program for the next say 12 to 18 months, what was that again?

Unidentified Speaker

 

I didn't give guidance per se, but if you look at, let's say, from this day going forward, we're are assuming that the cost to build the Efemçukuru project which Norm alluded to earlier will be coming out with new cost structure on that. And so, I would just say, let's assume, it's a total with working capital of $150 million. That would be our key accomplishment.

Unidentified Speaker

 

I mean -- look, don't need to give you -- yeah, I mean just to cut through it, Doug, we put aside the São Bento disposition. The company through cash and cash flow has and had the ability to build, to develop out the Vila Nova Iron Ore project and the Efemçukuru project in the next 18 months. So the disposition of São Bento simply adds to our cash reserves.

Doug Groh - Tocqueville

Well, that's great. So you could go back your stock?

Unidentified Speaker

 

That is an option.

Doug Groh - Tocqueville

That's great. Well, thank you very much.

Unidentified Speaker

 

Okay.

Operator

Thank you. The next question will be from Haytham Hodaly from Salman Partners. Please go ahead. Your line is now open.

Haytham Hodaly - Salman Partners

Good morning, Paul. How are you?

Paul Wright

Good.

Haytham Hodaly - Salman Partners

Good. Just -- most of my questions have actually already been answered, but I did have a question. Just want to talk about Efemçukuru a little bit. Can you just give us a little update to how is -- I know it's says in the news release that the land acquisition has been halted or stalled, I guess, for now. What process are you taking? How are you going about dealing with the people there? And just is there any new injunctions or anything that the environmental, the NGOs or anybody else has filed against Efemçukuru?

Paul Wright

Look, we have the cases that we've previously stated. I mean there is a -- there was an injunction decision that relates to the expropriation, and we have wait for the case to be held. But that doesn't preclude the few remaining landowners to coming and selling us the land if they choose to do so. And obviously, the vast majority have done so, and we anticipate that others will.

Haytham Hodaly - Salman Partners

Okay. Nice, perfect. Thank you.

Paul Wright

Welcome.

Operator

Thank you. The next question will from Kerry Smith from Haywood Securities. Please go ahead. Your line is now open.

Kerry Smith - Haywood Securities

Thanks, operator. Good morning, everybody. Paul, just on Efemçukuru, with the 20% the land that you haven't been able to acquire so far, is any of that land critical in terms of the development plan or is it land that you would need subsequent and it's not really a big panic to get it tied up?

Paul Wright

Look, it's not a big panic, Kerry, because the reality is that the infrastructure that we have is -- the infrastructure is predominately located on lands that we control. And again, just to remind you, the majority of the land that we are dealing with here is actually forest lease.

Kerry Smith - Haywood Securities

Great. And most of it's on forest leases? I remember the access road and…

Paul Wright

That's right.

Kerry Smith - Haywood Securities

And what about like the mill site and tailings and all the rest of that, is that on private land or is that on forest land?

Paul Wright

On forest land.

Kerry Smith - Haywood Securities

Okay. So, basically all the infrastructure is on land that you've already got a deal done on. Okay.

Paul Wright

It's -- our view that it's just -- it's a matter of time to complete the balance of the exercise.

Kerry Smith - Haywood Securities

And just for Norm, just on Kisladag, your -- I think you suggested the grade would be sort of 1.15 grams through the second half. Is that sort of going from 1.5 grams now up down to 1.15 grams by yearend or sort of average 1.15 grams…

Norm Pitcher

Well, Kerry, what I was saying was there is going to be a slight decrease in that weight over the next half of the year and that decrease is sort of in a (inaudible), it's not a big decrease.

Kerry Smith - Haywood Securities

Okay. Sorry, so I misunderstood. So, the grade is going to maybe drop by 0.1, 0.15 by yearend?

Norm Pitcher

Yeah.

Kerry Smith - Haywood Securities

Okay, okay, great. That helps me there. And can you just remind me how many shares you actually issued for Frontier Pacific for the acquisition, just what the actual number was?

Paul Wright

20 million, Kerry.

Kerry Smith - Haywood Securities

20 million, okay. Did you disclose that number or I just calculate it out?

Paul Wright

I'm pretty certain it was disclosed, Kerry.

Kerry Smith - Haywood Securities

Okay. I'll look in the press release. And just on the DD&A for the two operations, would Q2 DD&A be sort of typical on a go-forward basis for those assets?

Unidentified Speaker

 

Yes, Kerry.

Kerry Smith - Haywood Securities

Okay. Okay, that's great. Thanks very much.

Unidentified Speaker

 

Thanks, Kerry.

Operator

[Operator Instructions]. The next question will be from Steven Butler from Canaccord Adams. Please go ahead. Your line is now open.

Steven Butler - Canaccord Adams

Good morning, guys. A question I guess, Earl, on just the cost per ounce. Just coming out to depreciation, I'm kind of wondering if there is maybe a typo, but might be my fault. Total cash cost to total production cost in Tanjianshan is only in the second quarter highlights on page three or four or five, only 20 -- 22 bucks an ounce difference. Is that explainable or what's happening in the Tanjianshan for total production cost being so immaterially higher than total cash cost?

Unidentified Speaker

 

Well, I think -- I indicated to you when we did our tax calculation that there were some changes there in what we are allowed. And so, it is lower, but that is why I think what you need to do for the calculation, I implied that you need to look at the year-to-date numbers. If you look at the difference in the 302 to 495 and calculate that, then you'll come up with what is the correct number.

Steven Butler - Canaccord Adams

Okay. It…

Unidentified Speaker

 

Our forecasted number going forward, using that model.

Steven Butler - Canaccord Adams

Okay. In other words, the minority interest catch-up is maybe prior to that?

Unidentified Speaker

 

Yeah.

Steven Butler - Canaccord Adams

Okay. I missed that earlier, sorry. And then, did you guys or not provide -- I came in after the Northgate call; my apologies. But production in cash cost guidance, I think you reaffirmed 225 per ounce or not at Kisladag. You had started the year with 190,000 ounces at 222 per ounce. What are you confirming now or not?

Unidentified Speaker

 

No, I mean…

Steven Butler - Canaccord Adams

At Kisladag.

Unidentified Speaker

 

Just in gross terms, as people were saying, as we're guiding, we continue to guide toward 300,000 ounces for the year, whereas the weighted average cash cost initiatives were in the 240, 245, 250 range. Our guidance now is 255 to 260 and -- for the total with the increase occurring in Kisladag or projected to increase in Kisladag.

Steven Butler - Canaccord Adams

Okay. And on the roaster, what is the throughput change that comes or is not so much a throughput increase to go to roaster at Tanjianshan, I'm sorry?

Unidentified Speaker

 

No, there is not -- there isn't -- we actually have a fair bit of excess capacity in the roaster, more so that we do in the mill actually. But, no, we're still looking at normally 800,000 tons per year throughput.

Steven Butler - Canaccord Adams

Okay. And how about -- Norm, I guess, how about roaster incremental milling cost? Is it materially different than what we're talking about now or any bump to milling costs for roaster implementation?

Norm Pitcher

It will be a little bit higher, yeah. Sure, it's got to be those increased power consumption, but I wouldn't say -- it's normally higher.

Unidentified Speaker

 

Well, Steve, it's reflected in the head grade, moving to mining refractory material going through the roaster would increase the head grade a little bit. So, average grade going through the mill will increase accordingly.

Steven Butler - Canaccord Adams

Right. Okay. And recoveries will be maintained roughly where we are now or…

Unidentified Speaker

 

Yep.

Steven Butler - Canaccord Adams

Okay. Thanks very much, guys.

Unidentified Speaker

 

Yeah.

Operator

Thank you. The next question will be from [Steven Manning], a private investor. Please go ahead. Your line is now open.

Steven Manning - Private Investor

Yeah, I have a question regarding a press release that was put out by a certain AuEx company that stated that they had signed a letter of agreement with Eldorado Gold Corporation for some properties in Nevada.

Unidentified Speaker

 

Yeah.

Steven Manning - Private Investor

And I have seen neither confirmation nor denial of this from El Dorado itself.

Unidentified Speaker

 

Well, we can confirm that. And yeah, I apologize. I probably should have covered that in my exploration section. It's a small -- look, it's a small that we're taking there. And among the management here, on the technical side, most of us have actually worked in Nevada at one time or another. It's a jurisdiction we feel pretty comfortable with. We like the AuEx management in terms of their exploration skills. And yeah, we don't do a lot of -- we don't do a lot of that sort of joint venture type stuff. And this one we are -- we sort of liked the properties and liked the people. And yeah, so we can confirm that.

Steven Manning - Private Investor

Okay. Great.

Operator

Thank you. There are no further questions registered at this time. I'll return the meeting back to you, gentlemen.

Paul Wright

Thanks, operator. And again, thank you very much for attending the call and please don't hesitate to contact myself or Nancy Woo with any questions. We look forward to speaking to you on the next quarterly results.

Operator

Thank you. The conference call has concluded. You may disconnect your telephone lines at this time. We thank you very much for your participation.

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Source: Eldorado Gold Corp. Q2 2008 Earnings Call Transcript

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